Primary sector still growing despite dairy woes, says Minister

Boosting the sector's innovation capability was a key priority identified by sector leaders in KPMG's report. Graphic / NZ Herald

Primary Industries Minister Nathan Guy has told a Fieldays audience today that a new report on the sector will point to a $1 billion gain in primary exports over the last 12 months, up 3 per cent on the previous 12 months, and 20 per cent growth over the next four years.

The ministry's "situation outlook" report showed that dairy fell by 6 per cent over the last 12 months, which was expected.

"But importantly what it says is that horticulture has had a boom year - driven off the back of kiwifruit, wine, apples and pears," Guy said.

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"And it's going to continue to go gangbusters in the future," he said.

"The primary sector is in very good heart and it is my belief that it would not take much for the supply/demand imbalance to correct in terms of the dairy industry and that we see some really positive signs," he said.

His thoughts come after a new report into the sector was released by KPMG, which says New Zealand's primary sector needs to innovate and reinvent itself if it is to thrive in what the World Economic Forum recently called the "fourth industrial revolution."

The international consultancy said the latest edition of Agribusiness Agenda - an annual publication that takes the pulse of New Zealand's agribusiness sector - had highlighted how the fusion of new digital and biotechnologies - with traditional physical practices - would place the agri-food sector at the centre of change.

Ian Proudfoot, KPMG's global head of agribusiness, said New Zealand's primary sector must be prepared to completely transform itself because the future will look radically different within 5 to 10 years.

"What has delivered us success in the past will not bring success in the future," Proudfoot said.

"Change will be coming at speed from all quarters; including innovation from competitors, new disruptors entering the market, and changes demanded by our consumers," he said.

Proudfoot said it was dangerous to assume that the agri-food system would again be isolated from the revolutionary changes shaping society and the wider economy, as had been the case with the preceding revolutions.

"The fourth revolution will leave no aspect of our lives untouched," he said. "And given it is centred on the fusion of physical, digital and biological technologies; the agri-food sector will be at the centre of much of the change that occurs.

"It will reshape how food, beverage, fibre and timber is produced, processed, distributed and consumed around the world. Similarly, it will revolutionise the clothes we wear, the fibres they're manufactured from, and the materials used to build our homes," he said.

KPMG had sought input from over 150 primary sector leaders during a series of roundtable discussions for the report. Proudfoot said the current dairy downturn had challenged leaders to think more deeply about their future.

"People are speculating over whether we've reached peak dairy, and focusing on how we can realise more value from the attributes of grass fed milk," he said.

"They're also thinking about the other available uses for the country's land - particularly irrigated land - that may deliver higher returns in the future," he said.

Graphic / NZ Herald

The World Economic Forum's annual meeting at Davos a fortnight ago suggested this would be remembered as the start of the Fourth Industrial Revolution following on from 1784, 1870 and 1969 as the years historians consider to mark the start of each of the preceding revolutions; the industrial, technological and digital revolutions.

"The beginning of the Fourth Industrial Revolution highlights that we are moving into a new era of opportunity to grow the wealth and prosperity of all New Zealanders," KMPG said.

"Our ability to thrive in these exhilarating times and realise the opportunities created will depend on how we respond to the evolving needs of those who consume our food, beverage, fibre and timber products," it said.

There's no shortage of good ideas in New Zealand - but we often lack the commercialisation skills to take the solution from the lab to the world market.

"Change will be coming at speed from all quarters; including innovation from competitors, new disruptors entering the market, and changes demanded by our consumers."

Boosting the sector's innovation capability was a key priority identified by sector leaders in KPMG's report.

"There's no shortage of good ideas in New Zealand - but we often lack the commercialisation skills to take the solution from the lab to the world market," Proudfoot said.

One suggestion was to create a standalone capital fund that took early-stage investment positions in transformational technologies. Another important topic was the role of governance in New Zealand's primary sector organisations.

There was a concern that many boards have a disproportionate focus on risk and compliance at the expense of growth strategies, he said. The new era of disruption would also require people with fresh thinking and mission-critical skills - which may require some companies to rebalance the mix of skills available to the board.